Hurricane

Kunstler's latest.

September 15, 2008
A Ripe Moment

It turns out the real hurricane blew through Wall Street last week, not Galveston. This morning, Manhattan is strewn chest-deep with the debris of banking and at this hour (seven a.m.) nobody knows how far, deep, and wide the damage will spread. The fear, of course, is that we are witnessing a classic "house-of-cards" or "dominos-in-a-row," situation, and that the death of Lehman Brothers and Merrill Lynch will cascade into a generalized collapse of the entire consensus of value that supports mediums of exchange.

At least one thing ought to be clear: this has happened due to the negligence and misfeasance of the regulating authorities, namely the Republican Party, and that now all the hoopla surrounding Sarah Palin can be swept away revealing that group to be what they actually are: the party that wrecked America. I hope one or two Barack Obama campaign officials are reading this blog. You must commence the re-branding of the opposition right now. The Republicans must be clearly identified as, the party that wrecked America.

Many things happening this week will be interesting to see and hear, but just now an outstanding question is how on earth can the Bank of America buy Merrill Lynch for $50 billion after assuming the liabilities of the tarbaby known as Countrywide? But that little detail may be lost in the din as other banks and bank-like organizations start crashing like sequoia trees in a national forest.

I wish I knew whether this extravaganza of ruin might settle the question as to whether America goes into hyperinflation or implacable deflation, but the net effect is that money is leaving the system in big gobs. And if not money per se, then the idea of money as represented in certificates, contracts, counter-party positions, and gentlemen's agreements. This is the day that America finds itself a much poorer nation. The capital we thought was there, is gone.

A lot of it was actually translated over the years into Hamptons villas, Gulfstream jets, and other playthings that will now go up on Ebay or some equivalent as we turn into Yard Sale Nation in a general liquidation of remaining assets. Of course, the trouble in a situation like this, where absolutely everybody is trying to pawn off assets, is that there are very few buyers on the scene, so the prices of all these things go down down down. Everything is for sale and nobody has any money.

This was essentially the state of things in the Great Depression of the 1930s, and the only escape from that turned out to be the mobilization for war. And in the aftermath of that terrible war, we were the only industrial nation that hadn't been bombed to rubble. What's more, we had a very handsome supply of industrial world's primary resource, oil, at our disposal. So we spent the next thirty years making oodles of things and selling them to people in other lands (lending them the money to buy), until these nations were back on their own feet and solvent. And after 1975, the industrial club picked up a bunch of new members and they all began to clean our clock.

So, as our industrial base waned, and our factories got old and brittle, and our labor force was steeply under-bid by cheaper labor forces, we embarked on a quest for "the new economy." This was represented in successive turns as the information economy, the consumer economy, the high-tech economy, et cetera. They were all ruses, aimed at concealing the truth -- which was that we had become a society no longer producing things of value, no longer generating real wealth. The final act of this farce has been the so-called "financial industry."

That "industry" turned out to be most earnestly devoted to the production of complex swindles. They were so finely engineered that it took twenty years for the swindles to stand revealed, and they were cleverly hitched to the primary thing that the American public vested its identity in: house-and-home. Thus, much of the public finds itself in very real danger of becoming homeless and broke.

We generally recognize that some wicked-massive transfer of wealth occurred in the process of the mortgage fiasco, but it remains to be seen whether any residue of this wealth can actually be retained, as represented by currencies, contracts, and supposed securities. The wholesale settling of debt now underway may leave an awful lot of this stuff with no value.

We should be frightened by the political implications of this Great Implosion of presumed wealth. Some group of somebodies will have to clean up this mess. Moving toward a major election, it is hard to imagine the American people giving the clean-up task to the very group that created the mess -- no matter how many cute little faces Sarah Palin can make on TV. Both parties have so far managed to ignore the gathering crisis of banking and money, but they can't ignore the sequoia trees crashing down around their ankles and shaking the earth they stand on.

At issue now will be the question of legitimacy in all its human social dimensions. Is our money legitimate? Is the authority of our elected officials legitimate? Are our values and ideas legitimate? These are the things that will determine what kind of future we find ourselves in.

So, to begin this process, and to clarify the situation, I urge readers of this blog to identify the Republican Party by its new brand-name: the party that wrecked America. At least, then, we can reinstate one cardinal value into the juddering structure of what we claim to believe: that actions have consequences, that you can't just swindle and loot a society and walk away with the swag.

Spread the word, change the tone of this campaign, and keep posted. This will be a momentous week.

==END OF KUNSTLER COLUMN==

Incidentally, I'm reading The Forgotten Man: A New History of the Great Depression by Amity Shlaes.